Fund a Business Transfer

Selling a business interest involves a substantial amount of planning. Essentially, such planning involves finding a willing buyer, preferably amoung surviving partners or stockholders, or perhaps among employees of the business. In any type of arrangement, an important ingredient is an agreement by the buyer and the seller that, in the event of death, the deceased’s business interest will be sold at a predetermined price. Such an agreement is called a buy-sell agreement. As you can imagin, an essential provision in such an agreement is the funding provision. Without funds to buy, even the most carefully prepared buy-sell agreement is scarcely worth the paper it’s printed on.

Funding is where life insurance can play a vital part. In a properly prepared agreement, the needed funds must be available at exactly the time needed: at the death of the owner of the business interest. How does life insurance achieve this? Simple; insurance on the life of the owner of a business interest, payable to the beneficiary who is the buyer of the business interest, can fund the buy-sell agreement with the amount needed at exactly the time needed.